Britain could lose its cherished top-tier credit rating that provides access to cheap borrowing on international markets after a downgrade of its economic outlook by Standard & Poor's today. The ratings agency expressed alarm about the country's ballooning budget deficit and switched its outlook from "stable" to "negative," prompting the Conservatives to issue further calls for an immediate general election.

Figures out today showed Britain ran a record deficit in April of £8.5bn and consultancy PricewaterhouseCoopers warned that balancing the public finances will cost every British family £5,000 a year by 2018.

S&P said there was a "one-in-three" chance that Britain's AAA credit rating on its sovereign debt may be cut. A lower credit rating pushes up the cost of borrowing.

The surprise news pushed shares in London down sharply and caused gilt yields to soar on renewed fears about the economy. The FTSE 100 closed down 2.75%, or almost 123 points, at 4,345.

"It's now clear that Britain's economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now," said the shadow chancellor, George Osborne. "For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative."

The Liberal Democrat Treasury spokesman, Vince Cable, said: "Alistair Darling has relied on implausible growth forecasts for the economy which nobody but himself believes. Markets hate uncertainty and until the government comes clean about how it intends to pay back its debt, it is perfectly possible that we will see a further deterioration in Britain's rating."

A Treasury spokesman insisted that the chancellor had laid out plans in last month's budget to halve the deficit in the next five years. "Standard and Poor's have reaffirmed the UK's AAA rating on the basis of our 'wealthy, diversified economy; high degree of fiscal and monetary flexibility' and 'relatively flexible product and labour markets'," he said. "There are significant uncertainties in the global economy at the present time and S&P point out that the outlook could be revised back to stable 'if fiscal out-turns are more benign than [they] currently anticipate'."

Other agencies such as Moody's and Fitch have reaffirmed their AAA ratings for Britain.

S&P credit analyst David Beers said the ratings agency had based its outlook revision "on our view that, even factoring in further fiscal tightening, the UK's net general government debt burden may approach 100% of GDP and remain near that level in the medium term".

"We base our opinion on our updated projections of general government deficits in 2009-2013," he said, referring to the huge upward revisions to government borrowing projections announced by Darling in his budget on 22 April.

Colin Ellis, European economist at Daiwa Securities, said that with the AAA rating under threat, the S&P move highlighted the bad state of the public finances. "Whoever wins the next election, tax hikes and sharp spending cuts will be the order of the day – but today's announcement by S&P puts that much more pressure on the next government to act quickly."

PricewaterhouseCoopers released a study illustrating what future governments needed do to bring debt back below 50% of national income and cope with the effects of an ageing population.

John Hawksworth, head of macroeconomics at PwC, said there would need to be a "fiscal squeeze" – a combination of tax rises and public spending cuts – building up to between £115bn and £133bn a year by 2018, equivalent to about £5,000 for every family in the country.

He also said the government should consider raising the retirement age more quickly to combat the effects of increased longevity. "Provisions for these potential costs should be made sooner rather than later."